S&P 500: Good News For Apple And Microsoft – Investor's Business Daily

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October is unfairly known for jinxes and crashes for the S&P 500. But shares of Microsoft (MSFT) and Apple (AAPL) show much of the fear of the tenth month of the year is overblown.

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Eight stocks in the S&P 500, including both those technology giants and consumer discretionary Booking (BKNG), topped the S&P 500 during October in each of the past five years. In fact, information technology stocks often get a jolt of life during October, which is something this sector could use right now, says an Investor’s Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith.

More than half the stocks that routinely outpace the S&P 500 in October are in the information technology sector. And good news for Apple and Microsoft stock is important, given just how much of the S&P 500 is riding on those two stocks.

“Looking ahead to October, seasonal trends go back to favoring bulls,” said Bespoke Investment Group. Markets tend to rise in October over the past 100 years, Bespoke finds.

Don’t Fear The S&P 500 In October

There’s good reason for investors to fear September. But October unfairly gets a bad rap, too. Sure, October is infamous for crashes in 1929, 1987 and 1997 not to mention 2008. But October is actually the month that tends to put a stake through bear markets’ hearts, says “The Stock Trader’s Almanac.” October snuffed out 12 bear markets since World War II.

The S&P 500 has gained 0.8%, on average, during October since 1950. And that makes it a pretty ho-hum month, ranking 7th out of the 12 months of the year. But it’s not anywhere near the worst month of the year, as it used to be. In fact, October was the S&P 500’s best month from 1993 to 2007.

And it’s not just a fluke, either. The S&P 500 rose nearly 60% of the time in October, says “The Stock Trader’s Almanac.” And recently, October has been decent for the S&P 500, too. The index rose three out of the past five Octobers by an average of 0.7%. The best recent October was a 10.5% gain for the S&P 500 in 2015. And the worst? An 8% drop in October 2018.

S&P 500 Tech Turns It On In October

Technology stocks could use a jolt of energy. October might give it.

The Technology Select Sector SPDR ETF (XLK) dropped 5.6% in September. That not only was worse than the S&P 500’s 4.3% fall during the month, the tech sector saw many of its leading stocks falter into correction territory. But things typically look much better for tech stocks in October.

The Technology Select Sector SPDR posted an average gain of 2.4% in October the past five years. That’s more than three times the gain by the S&P 500 during that period. Additionally, tech stocks outpaced the S&P 500 in four out of the past five Octobers. The only exception was in October 2018, when tech stocks fell 8%, vs. the S&P 500’s 6.9% fall.

But some tech stocks never miss the benchmark in October. Look at one of the biggest of the big. Microsoft’s stock gained 6.2%, on average, in October the last five years. Even in October 2018, Microsoft stock only fell 6.6%, slightly better than the S&P 500. Given Microsoft’s strong run this year, it carries an IBD Composite Rating of 94. That means its chart and fundamentals beat 94% of all other stocks’. Should you buy Microsoft stock now?

Meanwhile, Apple is an October champ, too, never lagging the S&P 500 in that month for the past five years. It gained 5.3%, on average, in October the past five years. Just last year, Apple stock jumped 11.1% in October. And even in October 2018, Apple stock only fell 3%. What to know if you’d like to buy Apple stock?

Beware: October Has Potholes, Too

Clearly, this October is very different than in years past. For instance, online travel site Booking Holdings is usually an October favorite. The stock gained 4.2% in October, on average, the past five years.

But given the near standstill in travel with Covid-19 still afoot, it’s hard to see a repeat performance. It carries a low 45 IBD Composite Rating. And analysts think the company’s profit will drop 81% this year. Even in 2021, analysts think profit will be a third lower than it was in 2019.

And then there’s the election. It usually hampers the month’s returns. The S&P 500 dropped 0.7%, on average, during October in election years, says “The Stock Trader’s Almanac.”

Even so, October is definitely a month to not get scared away from S&P 500 stocks.

S&P 500 Stocks That Beat The Market Every October

Topped the S&P 500 every October since 2015

Company Symbol Avg. Stock % Gain In October (Since 2015) Sector Composite Rating
Lam Research (LRCX) 8.6% Information Technology 97
Microsoft (MSFT) 6.2% Information Technology 94
Teradyne (TER) 6.0% Information Technology 98
Apple (AAPL) 5.3% Information Technology 92
Booking Holdings (BKNG) 4.2% Consumer Discretionary 45
CDW (CDW) 3.7% Information Technology 86
Capital One (COF) 3.5% Financials 37
Nucor (NUE) 2.7% Materials 53
S&P 500 (SPY) 0.7%
Technology Select Sector SPDR (XLK) 2.4%
Source: IBD, S&P Global Market Intelligence

Follow Matt Krantz on Twitter @mattkrantz

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